10 comments to If only all adverts were so honest

One thing I do not understand is why the non-Big-Three automakers are so quiet; why doesn’t Toyota and the others lobby the Senators of the states where they have plants to attack the bailout? Why do Alabama workers have to pay for Detroit workers incompetence?

It isn’t about competence, it’s about cost. UAW labor costs on average $70 an hour with benefits (thank you Heritage Foundation). Non UAW plants cost per labor hour is much less, and allows for a profit. Ask Toyota, BMW and others – they can (and do) build cars for profit in the US (in right-to-work states, that is). How did we get here? Elections matter folks – elect politicians who pass laws which give unions too much advantage and there is no management in the world which can make the business profitable. Tax profits too much and guess what? there isn’t any capital to upgrade plants. Look at Ireland for what it’s low taxes on business have done for their economy. Laffer was right.

First, while there are union problems, the short-sighted leadership at the big-three is responsible for a large portion of the problems; for about the last two decades management has concentrated on maximizing the next quarterly profit statement at the expense of long-term abilities. It first started showing up as quality issues that turned a lot of Americans towards other manufacturers.

As far as the UAW goes, the hourly compensation for labor isn’t much of the issue — the non-UAW hourly compensation is less, but not substantially. The overall productivity per man-hour is where the big hit is. The UAW “contracts” have so many anti-productivity, anti-disciplinary and make-work provisions in them that even if hourly compensation was equal total labor costs per vehicle at UAW plants would be substantially higher.

For example, my father works as an engineer at a mid-size union plant. A few years ago they hired an industrial-engineering intern and they started him on a time-study of a particular line. The poor intern, about a week into his job, promptly had a union grievance filed against him because “monitoring union employees” was against the contract. In other words, the de facto union policy was that time studies were forbidden. If you’re familar with modern manufacturing, you can imagine what kind of impact this has on the bottom line.

And don’t forget the burden of paying 95% of wages to laid-off workers for 2 years, plus the “legacy” costs of outrageously generous pension benefits for retired workers. Taken as a whole, the union contracts are the biggest problem for the Big 3. The “concessions” demanded by Senate Republicans as a condition to a federal bailout aren’t sufficient; the only real cure is Chapter 11.

When the Employee Free Choice Act, also known Card Check, becomes law under an Obama Congress, the playing field will become leveled again. The UAW, with its work rules and retirement benefits, will extend its power to all auto manufacturing facilities in the US. At least, that’s the game plan.

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